Valentine’s Day is one of the preeminent gifting holidays of the year.  This year, V-Day alone is estimated to contribute $18.6 billion to the U.S. economy.  Gifts are great.  We at Hippo Reads love gifts.  (In fact, if our loyal readers are so inclined, our favorites include wine and chocolate.)

But economists disagree. Gift giving is a fundamentally wasteful practice, argues Joel Waldfogel, who has made a career out of campaigning against it.  His studies have shown that when people are asked how much they value gifts received, and compare that to the actual cost, there’s a striking difference.  A 20% difference in fact. Which means if you send your favorite curators at Hippo Reads a $100 stuffed owl, chances are we would have been willing to pay only $80 for it. Out of the $65 billion spent annually on gifts in the US alone, this translates into $13B dollars of dead weight loss every year.

Yet this isn’t the whole story. In 1925, French sociologist Marcel Mauss, published The Gift, a treatise that has become incredibly influential in the way anthropologists view reciprocity and exchange. In it, he argues gift giving is not a custom apart from an economy, but rather a crucial and inextricable component of it. In almost every culture and society, when a gift is given it carries with itself an obligation. First, there is always a sense it must be somehow repaid, whether in kind or through another mechanism.  Secondly, it transcends the material to become spiritual—a present always continues to carry with it some element of the giver:  “the objects are never completely separated from the men who exchange them.” Thus, gift giving has less to do with the gift and its value, and more to do with the interdependence created between the giver and receiver.  Understood in this context, the act of gift giving becomes a complex relationship building mechanism.

With these concepts in mind, we present Have You Ever Tried to Sell a Diamond?, Edward Epstein’s 1982 profile of the diamond industry. In addition to being one of best journal articles ever written, the work is a fascinating study of marketing genius. It describes in detail, quoting directly from documents of the then-29-year-old Harry Oppenheimer (Chairman of De Beers), to explain how Oppenheimer convinced first Americans, then the rest of the world, that buying a diamond engagement ring was de rigueur to ensure the solidity of one’s union.

De Beers’s media blitz included the grassroots efforts of reaching girls in high school assemblies, as well as the powerful PR might of the British Royal Family (who, having an interest in the mines, were only too happy to oblige). Although, as Epstein adroitly points out, “…diamonds can in fact be shattered, chipped, discolored, or incinerated to ash, the concept of eternity perfectly captured the magical qualities that the advertising agency wanted to attribute to diamonds. Within a year, ‘A Diamond Is Forever’ became the official motto of De Beers.”  The astute reader will note all this succeeded brilliantly because of the value humans place on gifts, not in spite of them. Given that Mauss’s treatise was published in 1925 and the diamond campaign began just a little more than a decade later, one wonders if perhaps Oppenheimer took his college courses in sociology to heart.

But Epstein also touches on another fascinating subject in the article that will appeal to the economist as well as the sociologist: having worked tirelessly to promote the diamond to young brides and grooms, De Beers then undertook the equally gargantuan task of making the diamond such a treasured keepsake it would be impossible to resell. This project required not only emotional manipulation, but also the semblance of financial sense: “The diamond-holding public, which includes people who inherit diamonds, had to remain convinced that diamonds retained their monetary value. If it saw price fluctuations in the diamond market and attempted to dispose of diamonds to take advantage of changing prices, the retail market would become chaotic. It was therefore essential that De Beers maintain at least the illusion of price stability.”

But gift giving is not all razor sharp as diamonds: to wrap up, a lighter read, a humorous piece by David Sedaris which brings gift giving practices into perspective. Or, more specifically, an essay about how a man walks into a taxidermist’s shop and walks out with a stuffed owl—as a present for his partner on Valentine’s Day.

Image credit: Michael Gil via flickr